The present invention relates generally to the management of employee benefits. More particularly, the present invention pertains to systems and methods for managing and/or controlling the delivery of employee benefits.
In the United States, an enormous number of individuals participate in an employment-based benefit program that, at a minimum, consists of health insurance. For example, health and welfare benefits may cost $4,000 to $5,000 per employee per year. In aggregate, employee benefits are a very large market, and even larger if retirement-related benefits are included. A large amount of economic resources is spent every year on benefit procurement and administration.
An employer (e.g., a benefit plan sponsor) that desires to start a new or change an existing benefit plan can either internalize or outsource the business process. Most companies do not have the internal resources required to deal with the myriad of benefit providers, products and the redundant, paper-driven processes necessary to gather, report and maintain the required benefit information. Thus, benefit broker/consultants (e.g., independent brokers or benefit broker/consultant firms) are used to facilitate the procurement of benefits for the vast majority of workers employed by small to mid-sized employers. As a result, benefit broker/consultants hold the key professional relationships with employers and benefit providers in the benefit supply chain. The remaining U.S. workers are typically employed by large companies who often, but not always, use their own internal resources to evaluate, select and administer their benefit programs.
The benefit broker/consultant market is a highly fragmented industry, with 90% of firms employing less than 10 people. Labor-intensive and paper-driven activities plague the industry, resulting in long sales cycles, high costs, increasing customer dissatisfaction and a lack of cost effective, comprehensive benefit program solutions. Paper processing, manual document development, repetitive phone calling, duplicative hard copy printing/faxing/mailing and vulnerability to human error characterize these inefficient administrative processes. It is estimated that 90% of all benefit transactions are handled by paper.
The benefit industry has not yet developed the technology to resolve these problems because the benefit industry, due to its complexity and fragmentation, has historically focused more on pricing and revenue gains, than on expense reduction and productivity. The benefit consumers (e.g., employers and employees) have borne the cost burden of the industry's supply chain inefficiencies.
The industry has been largely ignored by software developers due to its fragmented nature and complex business processes. Furthermore, benefit brokers do not have the resources (e.g., financial, time, people resources), nor the expertise to develop and maintain the technology themselves. Benefit providers, primarily insurance companies, are insular in nature and are focused on internal processes and communications. This has resulted in isolated legacy systems, a lack of common standards, and far less business automation than other service providers, such as banks and investment firms.
Although the high distribution costs and inefficiencies of the benefit supply chain have historically been borne by the buyers (e.g., employers and employees), powerful new trends are emerging that will shift the paradigm to the advantage of the benefit consumer. For example, major regulatory change is occurring. Government action is triggering profound structural changes in the industry by forcing the transition from paper-based to electronic communications. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) establishes electronic transaction standards and code sets, along with privacy and security standards for the health care industry. Further, health care costs and high levels of employer and employee dissatisfaction are increasing. The benefit industry is under increased pressure to reform itself.
Within the benefit supply chain, benefit providers (e.g., insurance companies) underwrite the products that intermediaries (e.g., benefit brokers) distribute to employers (e.g., plan sponsors) who enroll their employees for plan coverage. The benefit broker/consultant facilitates procurement of the vast majority of these plans as well as the accompanying administrative services that often are outsourced to third party vendors. Strategically positioned as the benefit distributor, the benefit broker/consultant may represent up to hundreds of employer/clients and many benefit providers. Although large corporations often deal directly with benefit providers, benefit distribution is largely controlled by benefit broker/consultants.
Although various products are currently being used in the benefits supply chain, they do not effectively address the problems as discussed above. For example, many companies (e.g., an intermediary company) offer specific, limited products and/or services that require customers to use their intermediary company proprietary portal, thereby inserting an additional cost, image and distribution component into the benefit supply chain. Others provide little more than electronic enrollment systems. Additionally, most companies have not provided an adequate reduction in paperwork. Their systems typically do not directly connect to the benefit broker, the benefit provider and employer. In other words, a direct result of such a process is that data often has to be re-keyed, particularly in a plan set-up stage.
These companies provide varying combinations of the pre-sale and post-sale processes that make-up the employee benefits business cycle. For example, such processes include pre-sale services like enterprise management or benefit plan marketing and procurement; or post-sale services like benefit provider plan installation, plan enrollment, plan administration, or plan premium remittance.